7. Share Tracking Award Plans

We previously issued awards under the United Therapeutics Corporation Share Tracking Awards Plan, adopted in June 2008 (2008 STAP) and the United Therapeutics Corporation 2011 Share Tracking Awards Plan, adopted in March 2011 (2011 STAP). We refer to the 2008 STAP and the 2011 STAP collectively as the "STAP" and awards granted and/or outstanding under either of these plans as "STAP awards." STAP awards convey the right to receive in cash an amount equal to the appreciation of our common stock, which is measured as the increase in the closing price of our common stock between the dates of grant and exercise. STAP awards expire on the tenth anniversary of the date of grant, and in most cases they vest in equal increments on each anniversary of the grant date over a four-year period. The STAP liability includes vested awards and awards that are expected to vest. We recognize expense for awards that are expected to vest during the vesting period. We discontinued the issuance of STAP awards on June 26, 2015, when our shareholders approved the United Therapeutics Corporation 2015 Stock Incentive Plan (the 2015 Plan), a broad-based stock incentive plan enabling us to grant stock options and other forms of equity compensation to our employees. See Note 11—Stockholders' Equity to these consolidated financial statements for information on the 2015 Plan.

The aggregate balance of the STAP liability was $354.8 million and $322.7 million at December 31, 2015 and 2014, respectively, of which $80.2 million and $40.6 million, respectively, has been classified as non-current liabilities under the caption "Other liabilities" on our consolidated balance sheets based on their vesting terms.

Estimating the fair value of STAP awards requires the use of certain inputs that can materially impact the determination of fair value and the amount of compensation expense (benefit) we recognize. Inputs used in estimating fair value include the price of our common stock, the expected volatility of the price of our common stock, the risk-free interest rate, the expected term of STAP awards, the expected forfeiture rate and the expected dividend yield. The fair value of the STAP awards is measured each financial reporting period because the awards are settled in cash.

A description of the key inputs, requiring estimates, used in determining the fair value of the awards is provided below:

Expected volatility—Volatility is a measure of the amount the price of our common stock has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. We use historical volatility based on weekly price observations of our common stock during the period immediately preceding an award that is equal to its expected term up to a maximum period of five years. We believe the volatility in the price of our common stock over the preceding five years generally provides a reliable projection of future long-term volatility.

Risk-free interest rate—The risk-free interest rate is the average interest rate consistent with the yield available on a U.S. Treasury note with a term equal to the expected term of an award.

Expected term—The expected term reflects the estimated time period we expect an award to remain outstanding. For the years ended December 31, 2015 and 2014, we used historical data to develop this input. Prior to 2014, we applied the simplified method to develop an estimate of the expected term. The change in methodologies for calculating the expected term of an award did not have a significant impact to our consolidated financial statements.

Expected forfeiture rate—The expected forfeiture rate is an estimated percentage of awards granted that are expected to be forfeited or canceled on an annual basis prior to becoming fully vested. We derive our estimate based on historical forfeiture experience for similar classes of employees.

Expected dividend yield—We do not pay cash dividends on our common stock and do not expect to do so in the future. Therefore, the dividend yield is zero.

The table below presents the assumptions used to measure the fair value of STAP Awards:

	As of December 31,
	2015			2014			2013
Expected volatility		35.3	%		34.0	%		32.7	%
Risk-free interest rate		1.4	%		1.3	%		1.1	%
Expected term of awards (in years)		3.4			4.0			3.9
Expected forfeiture rate		8.8	%		9.3	%		10.1	%
Expected dividend yield		0.0	%		0.0	%		0.0	%

A summary of the status and activity of the STAP is presented below:

	Number of Awards			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in 000s)
Outstanding at January 1, 2015		7,716,424		$	62.59
Granted		1,655,388			159.68
Exercised		(2,281,711	)		56.71
Forfeited		(244,938	)		95.37

Outstanding at December 31, 2015		6,845,163		$	86.86		7.3	$	487,010


Exercisable at December 31, 2015		2,115,571		$	67.79		6.1	$	188,683


Expected to vest at December 31, 2015		4,306,092		$	95.34		7.9	$	271,767

The weighted average grant-date fair value of STAP awards granted during the years ended December 31, 2015, 2014 and 2013 was $58.52, $33.82 and $24.78, respectively.

Share-based compensation expense recognized in connection with the STAP is as follows (in thousands):

	Year Ended December 31,
	2015			2014			2013
Research and development	$	87,372		$	72,269		$	134,355
Selling, general and administrative		178,100			82,937			143,407
Cost of product sales		8,706			4,283			6,124

Share-based compensation expense before taxes		274,178			159,489			283,886
Related income tax benefit		(103,431	)		(56,560	)		(106,693	)

Share-based compensation expense, net of taxes	$	170,747		$	102,929		$	177,193


Share-based compensation capitalized as part of inventory	$	7,063		$	2,027		$	1,593

Cash paid to settle STAP exercises during the years ended December 31, 2015, 2014 and 2013 was $248.8 million, $144.1 million, and $55.9 million, respectively.